Banks offer different types of accounts like a savings bank account, current accounts, FD accounts, RD accounts and so on. These accounts are customized to suit the needs of different types of investors. Different types of bank accounts allow customers to meet financial goals and provide them with a means to carry out banking functions easily.
Choosing the right type of bank account is important as it helps manage money easily. For example, a business entity must open a checking account for facilitating day-to-day transactions. A savings account will not give the required flexibility to conduct business transactions.
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Let’s discuss the different types of bank accounts and their benefits.
Savings Bank Account: A savings bank account is offered by banks where the customer can park surplus funds as well as earn interest income of 3.5% to 4% a year.
The rate of interest on a savings bank account is calculated based on the average balance maintained each month. A savings account offers much-needed liquidity and allows customers withdraw their money as per requirements.
A savings account is mainly used to set aside some money which is not needed for immediate use. The funds in the savings account can be accessed through debit cards, bank ATMs or internet and mobile banking. Unlike current accounts, the savings account has certain limitations on the number of transactions or the amount of withdrawals in a month. A savings bank account gives flexibility and liquidity to the customers as well as charges nominal fees.
Current Account: The current account is a facility offered by the banks, which customers/businessmen use for business transactions. Current accounts are also known as checking accounts. Current accounts are generally opened by a businessman for carrying out transactions on a regular basis. The accounts can be operated under single/ joint or company names and can be accessed through net banking, mobile banking, debit cards and bank ATMs.
Fixed Deposit Account: A fixed deposit account is where you can deposit a lump sum and earn higher interest rate than a savings bank account. A fixed deposit account is considered to be the safest investment option, and offers attractive interest along with capital protection.
The fixed deposit account comes with flexible tenure which means the depositor can choose the tenure as per requirements. Once the money is deposited, the principal amount starts earning a fixed rate of interest until maturity. But unlike savings or checking accounts, fixed deposit account does not offer flexibility or liquidity to customers.
Recurring Deposit Account: A recurring deposit account is a special type of account offered by the banks, where the customer creates a corpus by depositing a fixed amount over a pre-defined tenure. People with regular income can invest in a recurring deposit account to save a part of their salary, as well as earn attractive interest on deposits. The tenure of the recurring deposit ranges from 6 months to 10 years.
Money Market Accounts: This is an interest-bearing account where the deposit earns an interest based on the prevailing interest rates in the money market. Money market account offers the dual benefit of savings and checking accounts. A money market account pays higher interest on deposits than savings bank accounts, easy access to funds as well as the cheque facility. The downside of a money market account is that it requires a high minimum balance and has a specified transaction limit.
Government Scheme Savings Account: Banks allow customers to open a zero balance account under the Jan Dhan Yojana scheme. The main objective of this scheme is to help poor and rural citizens by giving them access to a bank account with zero balance.
Any Indian citizen can open a zero balance account in banks provided he/she is above 10 years of age. To open a zero balance account with the bank an applicant must submit the duly-filled and signed Jan Dhan Yojana account opening form along with the supporting documents. Almost all major public and private sector banks offer the facility of opening Jan Dhan Yojana Accounts across India.
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